Tag Archive: China
Position Adjustments at Month-End and Ahead of FOMC Outcome Lifts the Greeenback
Overview: A combination of month-end adjustments and
positioning ahead of the outcome of tomorrow's FOMC meeting has taken the shine
off equities and has helped lift the dollar. On the heels of yesterday's sharp
decline on Wall Street, several large markets in the Asia Pacific region,
including China's CSI 300, the Hang Seng, and both South Korea's Kospi and
Taiwan's Taiex fell by more than 1%. Although the eurozone eked out a small
expansion in Q4...
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Anti-Climactic Return of China
Overview: The re-opening
of China's mainland market amid reports of strong activity during the holiday,
was relatively subdued. The CSI 300 rose less than 0.5% and the Shanghai
Composite eked out less than a 0.2% gain. The 0.5% gain in the yuan was largely
in line with the performance of the offshore yuan. Indeed, it seems like a bit
like "buy the rumor sell the fact" type of activity as Hong Kong's
Hang Seng tumbled 2.75%, to give back...
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Subdued Ending to a Quiet Week, Ahead of Next Week’s Fireworks
Overview: Leaving aside the Australian dollar, which
is benefiting from the optimism over China's re-opening and a reassessment of
the trajectory of monetary policy after a stronger than expected inflation
report, the other G10 currencies traded quietly this week and are +/- less than
0.5%. The risk-on honeymoon to start the year remains intact. The MSCI Asia
Pacific Index has risen every day this week and index of mainland shares that
trade in...
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Euro Closed above $1.09 but Follow-Through Buying Limited
Overview: After
some intraday penetration, the euro finally settled above $1.09 yesterday. However,
follow-through buying has been limited and technical and option-related
resistance is seen in the $1.0940-50 area. The dollar is more broadly mixed
today, with the dollar-bloc and Norwegian krone leading the advancers. The
euro, yen, and sterling are nursing small losses near midday in Europe. The
recovery of US equity indices yesterday after gap...
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Dismal UK Retail Sales Weigh on Sterling, While the Yen Softens
Overview: The US dollar is mostly softer today against the G10
currencies, with the notable exception, yen, Swiss franc, and sterling. The
risk-on mood is seen in the foreign exchange market with the Antipodean and
Scandi currencies leading the move against the greenback. The yen has fallen by
about 1.3% this week, leading losers, while sterling's 1.1% gain puts it at the
top. Despite the poor showing of US equities yesterday, risk appetites...
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With Trepidation, the Market Awaits the BOJ
With the market nearly ruling out a 50 bp hike by the Federal Reserve on February 1, the interest rate adjustment appears to have largely run its course. This may be helping to ease the selling pressure on the greenback.
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Monday and Beyond
Monday Ranges: Euro: $1.0802-$1.0874JPY/$: JPY127.23-JPY128.87GBP: $1.2172-$1.2289CAD/$: CAD1.3353-CAD1.3418AUD: $0.6941-$0.7019MXN/$: MXN18.7313-MXN18.8566Rumors of an emergency BOJ meeting sent the dollar to its lows in Tokyo, slightly below the pre-weekend low (~JPY127.46). The on-the-run (most current) 10-year yield settled above the 0.50% cap and the generic 10-year bond has not traded below the 0.50% level since January 5. The market...
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Dollar Index Gives Back Half of 21-Month Gains in 3 1/2 Months
Overview: The continued easing of US price pressures
has strengthened the market's conviction that the Federal Reserve will further
slow the pace of rate hikes and that the terminal rate will be near 5.0%. The
decline in US rates has removed a key support for the US dollar, which has
fallen against all the G10 currencies this week. The Dollar Index has now retraced half of what it gained since bottoming on January 6, 2021. Meanwhile, there are...
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Is it Too Easy to Think the Market Repeats its Reaction to a Soft US CPI?
The market expects a soft US CPI print today, which has recently been associated with risk-on moves. The US 10-year yield is holding slightly above 3.50%, the lowest end of the range since the middle of last month. The two-year yield is a little above 4.20%, also the lower end of its recent range. Most observers see the Federal Reserve slowing the pace of its hikes to a quarter point on February 1.
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Greenback Consolidates Near Recent Lows Ahead of Tomorrow’s US CPI
Overview: Fed Chair Powell did not push against the easing of US financial conditions when he ostensibly had an opportunity yesterday. This coupled with expectations of another decline in the US CPI, which will be reported tomorrow, has kept the greenback mostly consolidating the losses seen last Friday and Monday.
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Greenback’s Sell-off may Stall Ahead of Powell Tomorrow
Overview: Don't fight the Fed went the manta as the
market took the US two-year yield back up to 4.50% in the aftermath of the FOMC
minutes last week, the highest in over a month. The minutes warned of a
premature easing of financial conditions. And then bam, softer than expected
hourly earnings and a weak service PMI and bonds and stocks rallied, and the
dollar was sold. This is a key part of the backdrop for this week, for which
several Fed...
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US CPI Featured and Why the Fed may Still Hike by 50 bp
The most important economic report in the week ahead is the US December Consumer Price Index on January 12. To be sure, the Federal Reserve targets an alternative measure, the deflator of personal consumption expenditures. However, in this cycle, when households, businesses, investors, and policymakers are particularly sensitive to inflation, CPI, which is reported a couple of weeks before the PCE deflator, has stolen the thunder.
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USD Stretched Ahead of Employment Report, while Yuan Jumps on Hopes of New Property Initiatives
Overview: The US dollar extended yesterday's gains
as the market adjusts positions ahead of the jobs data. Yesterday and today's
price action looks to have strengthened the near-term technical outlook for the
greenback. However, the intraday momentum indicators are stretched. This warns
of the risk of a counter-intuitive move after the data, barring a significant
surprise. Meanwhile, one of the Fed's leading hawkish voices, St. Louis Fed
President...
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Yesterday’s Gains Unwound may Make the Greenback a Better Buy Ahead of FOMC Minutes
Overview: Yesterday's greenback gains have been
mostly reversed today. New efforts by China in its property market and
anticipation of more stimulus helped rekindle the animal spirits today. Asia
and Europe shrugged off yesterday's losses on Wall Street and the rally in
bonds continued. The 8-12 bp decline in European benchmark 10-year yields comes
even though the final composite PMI was better than expected fanning hopes of a
short and shallow...
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The Dollar Jumps
Overview: Market participants have returned from the New Year celebrations apparently with robust risk appetites. Equities and bonds are rallying, and the dollar has surged higher. The markets seem to be looking past the surge in China's Covid cases and anticipates a recovery, helping Chinese equities lead Asia Pacific bourses higher, where Japanese markets are still on holiday.
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The Greenback Recovers After the Initial Post-Fed Wobble
Overview: The US dollar has come back bid after losing ground against
most currencies as the markets reacted to the FOMC decision and press
conference. The Antipodeans and Scandis have been tagged the hardest, illustrating
the risk-off mood, and arguably the weakening growth prospects. Countries that
peg their currencies to the dollar have hiked rates, as has the Philippines and
Taiwan. The Swiss National Bank and Norway have also lifted policy...
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What Can the Fed tell the Market it Does Not Already Know?
Overview: The softer than expected US CPI drove the
dollar and interest rates lower, while igniting strong advances in equities,
risk assets, commodities, and gold. Calmer market conditions are
prevailing today, and we suspect that in the run-up to the FOMC meeting, a broadly
consolidative tone will emerge. The dollar is mostly softer, but within yesterday’s
ranges. Only the New Zealand and Canadian dollars among the G10 currencies are softer....
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US CPI ahead of FOMC Outcome Tomorrow
Overview: The dollar
softer against the G10 currencies ahead of today’s CPI report and the FOMC meeting
the concludes tomorrow. Emerging market currencies are most mixed. The
Hungarian forint leads the complex with around a 1% gain on news of a
preliminary deal struck with the EU. The South African rand is the worst
performer, off around 0.8%, as impeachment proceedings against Ramaphosa
proceed. Global equities are mostly higher today after the...
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Markets Await Central Banks and Data
Overview: There are two themes today. First, there has been a modest bout of profit-taking on Chinese stocks (and yuan) after last week’s surge. Second, the ahead of the five G10 central bank meeting this week a series of market-sensitive economic reports, a consolidative tone is seen in most of the capital markets. Most of the large bourses in the Asia Pacific region fell, led by a 2.2% loss in Hong Kong and 3% loss in its index of mainland shares.
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China and the US at sovereign debt war
2023-01-27
by Stephen Flood
2023-01-27
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